Overview:
The USD/JPY is expected to trade in lower range. Undermined by negative dollar sentiment (ICE spot dollar index 79.70 versus 80.50 early Thursday) as the Congressional deal to temporarily extend the debt ceiling through Feb. 7 pushed back expectations for when the Federal Reserve will start tapering its $85 billion-a-month bond-purchase program, Chinese rating agency Dagong downgraded the U.S. to A minus from A, saying the U.S. "government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future." USD/JPY also weighed by lower Treasury yields; Japan exporter sales. But dollar sentiment soothed after Philadelphia Fed's index of manufacturing activity slipped less than expected to 19.8 in October (versus 15.0 forecast) from 22.3 in September. The USD/JPY loses also tempered by demand from Japan importers; yen-funded carry trades amid positive risk appetite (VIX fear gauge eased 8.36% to 13.48; S&P rose 0.67% overnight to hit fresh all-time high) on expectations that the Federal Reserve will keep its stimulus policies in place for longer due to the damage done to the U.S. economy by the government shutdown, and when Janet Yellen, who favors easy monetary policies, takes over as chief of the Fed next year; positions adjustment before weekend.
Technical Outlook:
The daily chart is mixed as MACD bullish; but bearish outside-day-range pattern completed Thursday, stochastics turned bearish near overbought.
Trading recommendation:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. A short position is recommended with the first target at 97.5 in view; a breach of this target will move the pair further downwards to 97.1. The pivot point stands at 98.15. In case the price moves in the opposite direction, bounces back from support, and moves above its pivot point, then the price is most favorably expected to move further to the upside, In that scenario a long position is recommended with the first target at 98.55 and the second target at 98.85.
Support levels:
97.5
97.1
96.75
Resistance levels:
98.55
98.85
99.3